Gas Supply and Transportation Issues: Gas to Power Demand

1. Gas Supply and Transportation Issues: Gas to Power Demand Dr. David Ige Group Executive Director, Gas & Power Nigerian National Petroleum Corporation November 28, 2011

2. Outline • Gas Sector Aspirations • Gas Supply Options • Infrastructure Update • Gas to Power Status • Conclusion

3. Overview of the Nigerian Gas IndustryGas Resource Base Nigeria has a huge economic potential trapped in this vast natural gas resource 600TCF Undiscovered Potential Source: EU Energy Portal; Transparency International, 2011 Report on Oil and Gas Companies

4. Gas Strategy and Anchor Sectors Strategic Framework for Nigerian Gas High Value Export Regional Pipelines LNG Gas to Power Gas Based Industrialisation “… By 2014, we would have positioned Nigeria firmly as the undisputed regional hub for gas-based industries such as fertilizer, petrochemicals and methanol.” • Significantly increase gas supply to the Power Sector • Focused delivery plan to support existing and ongoing power plants by PHCN and NIPP • Deliver Gas for at least 12GW by 2015 Consolidate Nigeria’s position and market share in high value export markets • Targeted LNG export opportunities • Regional gas pipelines that help consolidate nation’s footprint and influence Deliver on President’s Gas Revolution Agenda to: • Position Nigeria as the regional hub for gas-based industries such as fertilizer, petrochemical and methanol • Transform gas sector to value adding sector

5. Gas Consumption and Demand Forecast Based on the forecast growth in domestic gas demand, we foresee opportunities in transmission and marketing

6. Enabling Sector Policy – Stimulating Supply To support the agenda, a set of enabling policies were approved by His Excellency, Dr. Goodluck Jonathan. These are being rolled out and have created a major boost and jumpstart for the sector’s agenda Commercial Framework Reforms Domestic Supply Obligation (DSO) Regulation Scalable Gas Infrastructure Blueprint

7. Outline • Gas Sector Aspirations • Gas Supply Options • Infrastructure Update • Gas to Power Status • Conclusion

8. Gas Availability- Sources of Gas in Domestic Market 3 Sources of Gas in Nigeria Direct Bilateral Arrangement between Suppliers and Buyers Unutilized Gas Flares FGN Mandated Domestic Supply Obligations (DSO) • Small flared gas for which no plan exists to utilize but 3rd party players may propose utilization plans • Most significant short/medium term planned source of gas • Allocation of available gas from DSO sources managed by GACN • Gas from suppliers over and above their respective DSO • Managed bilaterally on a willing buyer, willing seller basis i.e. negotiated terms • Limited volume in the short term, particularly from IOCs.

9. Domestic Supply Obligation – Western Area Supply Projects 5 4 3 2 1 5 1 4 2 3 Dry Gas Existing Wet Gas Ongoing Projects - Wet Gas Gas from East FID Acceleration - Wet Gas

10. Domestic Supply Obligation – Eastern Area Supply Projects

11. Analysis of Stranded Gas in the East A significant amount of gas is stranded currently in the East mainly due to infrastructure and the delays in NIPP power plants

12. Strategy Aggregator Company:Gas Aggregation Company Nigeria (GACN) GACN was established to manage the Domestic Supply Obligations – Facilitate gas access and aggregation of gas pricing • Gas Aggregation Company Nigeria (GACN) Contact Details: • Office: #1B Malcolm Fraser Street, Asokoro, Abuja • Telephone: 098759045 • Email: info@gacn-nigeria.com

13. Outline • Gas Sector Aspirations • Gas Supply Options • Infrastructure Update • Gas to Power Status • Conclusion

14. Oben Ob/Ob Koko Port Escravos Utorogu Bonny LNG Map showing critical Infrastructures Kaduna Abuja Geregu Omotosho Olorunshogo Ihovbor Egbin Sapele Afam Delta IV Calabar

15. Status of Major Infrastructure Projects

16. Western Network Pipeline System • Olorunshogo Permanent Line • 24”permanent line to Olorunshogo. • Recent contract approval by Mr. P and contractor being mobilized. Due Apr 2012 • Will address pressure problem at Olorunsogo • Looping ELPS C • Doubling capacity to 2bcf/d from Warri to lagos • Due August 2012 • Pipes expected in October • ELPS A • Escravos to Warri expansion from 300mmcf/d to 600mmcf/d • Will allow immediate addition of 80mmcf/d from Escravos • Due end 2011

17. Eastern Network Pipeline System Completion of the NOPL pipeline in 2012 will unlock stranded gas from MPN (100mmcf/d); NAOC Ebocha (50mmcf/d) and TEPNG (60mmcf/d), bringing them to Obigbo Node hub from where Alaoji and other Eastern Power plants can be supplied

18. Eastern Network Pipeline System

19. Ongoing Pipeline Projects –ELPS Phase 1 Welding activities for Ethiope River Crossing Horizontal Directional Drilling Operation across Warri – Benin Express way Lowering of welded line pipes at NGC Right of Way through Jesse, Delta State

20. Ongoing Pipeline Projects –Alaoji, Olorunshogo ROW Clearing Pipe stacked on Site Offloading pipe on site

21. Roadmap to Securing Alternative Funding for Pipelines Jun 2012 Jan 2012 Dec 2011 Sept 2011 Dec 2012 AssessPipeline Tariff Review Tariff Affordability Review revenue securitisation Source for Investors Secure Financial Closure Description Assessment of pipeline tariff required to make 3rd party financing viable – this study now completed by NNPC Engagement of stakeholders (e.g. NERC) on affordability of tariff and implication for medium-term MYTO Checking of possible tariff revenue securitisation to make 3rd party financing bankable Road show to attract investors / financiers, selection of willing financiers/investors Investors secure financial closure

22. Outline • Gas Sector Aspirations • Gas Supply Options • Infrastructure Update • Gas to Power Status • Conclusion

23. Gas to Power Our efforts in Power are focused on meeting a projected 3.5 bcf/d of gas demand by over 30 existing and proposed power plants. 1 • Egbin + AES • Delta IV • Sapele • Olorunshogo • Omotosho • Geregu • Afam I-V PHCN 818 mmscfd 2 • Olorunshogo • Sapele • Geregu • Omotosho • Ihovbor • Egbema • Gbaran • Omoku • Alaoji • Calabar NIPP 1,297 mmscfd Grow Gas Supply to Power 3 • Chevron Agura • NAOC, Okpai • Total, Obite • Shell, Afam VI • ExxonMobil, QIT JV IPP 322 mmscfd 4 3rd Party IPP 531mmscfd Numerous 3rd party IPP in consultation with the Bulk Trader

24. Gas to Power Supply Outlook

25. New Gas Sources of Gas to Bridge Gap New sources of gas, hitherto not considered for domestic market e.g. bringing offshore PSC gas to shore, are being evaluated. This could add 400-500 mmscf/d by 2016/17 ErhaBosi- Development of offshore processing plant with offshore pipeline to transport about 400mmscfd of gas currently being re-injected to the western CPF in Koko. 1 Koko • CAMAC Oyo Field Development – Following options are being looked to monetized the currently re-injected 100-200mmscfd gas in Oyo field : • Offshore pipeline from Oyo to the western CPF in Koko • Offshore pipeline to ELPS via Chevron Okan gas processing plant • Offshore pipeline to OGGS 2 1 2

26. Outline • Gas Sector Aspirations • Gas Supply Options • Infrastructure Update • Gas to Power Status • Conclusion

27. Conclusion • We have an enabling policy framework is in place to support critical mass of gas supply development for the power sector • Very good progress being made in development of a robust gas grid that will enable rapid growth of supply from diverse sources increasing the liquidity of supply • Medium term outlook is promising and power sector investors can be assured of supply

28. APPENDIX

29. Role of GACN in Domestic Gas Market • Was created to manage Domestic Gas Supply obligations volumes • First point of contact for Gas Buyers to access gas for domestic market use • Primary aim Coordinate and manage wholesale gas supply from Gas Producers to eligible Gas Purchasers within Nigeria • Ensuring a balanced growth of all critical sectors of the economy: Power, Gas Based Industries and Local Distribution Companies Conduct due diligence assessment on eligible Gas Buyers Allocate available gas from the DSO to credible buyers successful on assessment Facilitate the expeditious execution of the GSAA and GTA between the buyer, seller and transporter respectively • Operational since Jan 2010

30. Due Diligence General Process

31. Map showing critical Infrastructures 31